Tax ID Number?

The time for gathering personal information needed to file a U.S. income tax return is at hand. Those of you who have been down this road before and have filed U.S. income tax returns in the past know the routine. For some others, however, this could be a new – and possibly overwhelming – challenge.

Each year, more people are added to the roll call of U.S. taxpayers; some knowingly and some unknowingly.

Are You a U.S. Taxpayer?

The “rule of thumb” for determining “roll call membership” is rather simple: Persons receiving taxable income from sources physically located within the United States are generally subject to reporting that income on a U.S. income tax return and paying any taxes associated with that income.

Factors such as citizenship, residency, and physical location where this receipt of “U.S.-sourced” taxable income had occurred, while seemingly important in the new taxpayer’s mind, don’t lend any weight to the matter. Only the source of the taxable income and its receipt count.

Examples of “new U.S. taxpayers” include foreign investors in a U.S. business or venture and widows or widowers whose late spouses had arranged for their pension benefits to be transferred to their survivors as an annuity.

Tax ID Numbers – What & Why

Obviously, with millions of taxpayers registered with the U.S. Internal Revenue Service (IRS), the use of taxpayers’ names to sort out “who’s who” is out of the question. Too many similar names cause too much confusion. Keeping track of taxpayers, their tax payments, and their compliance with tax rules and regulations, then, falls onto a system of unique identification: Tax ID Numbers (TINs).

For U.S. citizens, residents (e.g., “Green Card” holders), and a select few others, TIN assignment is simple. Anyone who is eligible for a U.S. Social Security Account and its associated Social Security Account Number (SSAN) must obtain a SSAN and use it as their TIN.

Generally, for all others who are not eligible to be assigned a SSAN, things are not as simple. These U.S. taxpayers must obtain an Individual Tax Identification Number (ITIN) from the IRS. The process to do so can be complex and time-consuming, depending on the situation at hand.

The only similarity between a SSAN and an ITIN is their function as a TIN. That’s it. The differences between the SSAN and the ITIN are many, but they can be summarized in a simple statement: An ITIN is a TIN, and absolutely nothing else, period.

An ITIN guarantees nothing, it bestows no privileges, and its use is totally meaningless outside of the realm of U.S. income tax. In a way, a SSAN is everything that an ITIN is plus everything that an ITIN is not.

Whether it’s a SSAN or an ITIN, U.S. taxpayers must have a valid U.S. TIN in order to “do business” with the IRS in filing tax returns and paying any taxes.

Obtaining a U.S. TIN

Regardless of which TIN is sought, there is always a government form that must be completed, signed, dated, and submitted to the specific TIN’s issuing agency. Additionally, accompanying that government form, the TIN applicant must provide supporting evidence of his/her identity and that he/she is eligible to apply for the particular TIN.

In reality, one doesn’t apply for a SSAN. One applies for a U.S. Social Security account, and the SSAN is issued to the account holder. Generally, applicants must apply in person at a local Social Security Administration office. Applicants holding state-issued identity cards or driver’s licenses from certain U.S. States have the option of applying online. Whether in person or online, there’s “paperwork” involved.

The application process for an ITIN is completely different. After all, ITINs are wholly controlled by the IRS, and that agency definitely does things differently.

At present, there is no method available to apply for an ITIN online. While “e-filing” has become vogue for many IRS-related processes, ITIN applications (and amended tax returns) are not among them. ITIN applications must be filed in paper format on an IRS Form W-7. Accompanying the Form W-7 must be supporting evidence of the applicant’s identity and the applicant’s “foreign status” (i.e., evidence that the applicant is not eligible for an SSAN).

If that’s not enough, there is an additional stipulation. ITIN applications must accompany an U.S. Individual Income Tax return being filed or, in cases of exception, must include specific proof that the applicant is required to have an ITIN. One just can’t apply for no reason.

ITIN applicants have the following options for filing their Form W-7 and supporting documents:

Applying by mail or by an IRS approved Private Delivery Service;

Applying in person at a designated IRS Taxpayer Assistance Center (TAC); or

The Philippines and many Pacific Rim countries do not have an IRS TAC available. So, for ITIN applicants in these locations, Option #2 does not exist.

The Form W-7 and its associated instructions are available for downloading from the IRS website at: https://www.irs.gov.

More to Follow, Later

I’ll provide more information about the ITIN application process in an upcoming article. There’s just too much information involved to relate all of it here in a single article. I will close with a few items of importance, however, that I’ll repeat in the next article.

Regarding the supporting evidence documents:

The IRS maintains a list of specific documents that can be used in support of an ITIN application, designating which can be used to establish identity and which can be used to establish “foreign status.”

Documents used to support the ITIN application must be either “original” documents – not photocopies – or copies that have been certified by the document’s issuing agency. Sorry, notarized documents are not accepted.

A valid Philippine passport (or a copy of a valid passport certified by the Philippine Department of Foreign Affairs [DFA]), is the only “stand alone” document that, by itself, can be used to establish both identity and “foreign status.” Otherwise, separate documents must be used for each category.

For now, I’m sure that the above is more than enough to digest at one sitting. As an IRS authorized CAA in the Philippines (1 of 3), I do get called upon for ITIN assistance quite regularly. I know that, as you read these final words, your head is ready to start spinning!

Paul is a CPA and a retired tax accountant, having served companies and corporations of all sizes, as well as individuals, in public accounting practices. Prior to what he refers to as his "real job," he served a 24-year career in the U.S. Navy, retiring as a Master Chief Petty Officer. It was during this career that he met and married his OFW spouse of 40+ years, Emy, while stationed in London, UK. (Though he pleaded for the assignment, Paul never received orders to the Philippines.)
A "Phil-phile" from an early age, Paul remembers his first introduction to the Philippines in the primary grades of a parochial elementary school where, one week each year, children donated their pennies to purchase school supplies, food and other necessities for Filipino children in need. That love for Filipinos continues to this day.
Calling Pasuquin, Ilocos Norte--in the far northwestern part of Luzon--home (just about as far away from Davao as one can be while still being on one of the major islands) Paul prefers a more relaxed provincial life style, and willingly shares a different view of the Philippines from "up north"!

The ITIN application process is as painful or as painless as one wishes to make it. Simply following the Form W-7 instructions explicitely, dotting all “i”s and crossing all “t”s will make the process painless. Unfortunately, there are far too many among us who “know better” or “heard from the friend of a friend” and take any number of shortcuts that lead directly to the application’s rejection.

Good summary. The ITIN process is pretty straightforward on the Federal side. On the state side, it’s a nightmare, as, unlike the feds, the state (mine anyway) will not even look at your state tax return of your spouse doesn’t have an SSN or ITIN. On the federal side, they process your return along with your ITIN application.

Hi Steve – That’s why the state income tax gods gave us amended state income tax returns.

State income tax returns require a Tan ID number for each taxpayer filing the return. No SSAN or ITIN? Sorry, can’t be included in the tax return being filed. The States depend on the IRS to investigate, verifying eligibility, and assign an ITIN to an eligible taxpayer.

Once the ITIN has been assigned, previously filed tax returns (state and federal, under certain circumstances) can be amended to reflect the additional taxpayer and adjust tax assessments.

Thank’s for all the good info. We had no problem getting my wife’s TIN with the tax return. We just got done dealing with the State of Ohio about being a resident there. We use my parents address just as a mailing address and nothing else, but Ohio Dept of Taxation did not believe me. I sent them copies of W-2’s, 1099’s, 1040’s and it still wasn’t enough so they garnished my Federal Tax Return. Finally they told me to send a copy of my Florida DL showing I was a resident of Florida in 2014. They were satisfied after almost 3 years of fighting this and they refunded my tax return that they garnished.

Most States don’t like their taxpayers just “disappearing” from their tax rolls. They have a process for “exiting taxpayers” to notify the state tax agency of the departure – a “Final” state income tax return. In this return, a taxpayer reports the date on which residency in that state officially ended, and “trues up” any state income taxes owed.

Failure to file a “Final” return will result in the tax revenue hungry state tracking a taxpayer down and taking whatever collection steps it can to obtain the tax revenue it believes the taxpayer owes.

Hello Paul: I could use some help in filing for my wife’s ITIN. We have been married and lived here in the Philippines since 2012. We have applied twice and have been rejected, always missing something with the application, but I can never see what that is. We have sent her original and current passport and other original documents. I think what I have done wrong is what we have said in the letter to them. So I really want someone to look at the documents and make sure that we have everything complete. We will try again. Without the ITIN for my wife (we always attempt to file Married Filing Jointly). When they reject it, this ends up costing me about $1800 in additional taxes. I think this will be a really big deal next year with the new tax law..reading about it, not being able to file Married Filing Jointly could cost me additional $7000. I just can’t do this. We are a legitimately married couple. Any help would be appreciated. Thank you, Rob

Hi Roger – the ITIN Operation division of the IRS is very, very picky when it comes to processing ITIN applications. Any misstep by the applicant guarantees a rejected application.

Some issues that you might have overlooked:

a) an ITIN application being filed for the purpose of a Nonresident Alien spouse filing a joint tax return requires the application (Form W-7) and its supporting documents to be filed in paper format WITH a paper formatted federal income tax return.

b) all signatures must be original signatures in black or dark blue ink. Photocopies of signatures are not accepted.

c) if not submitting original documents in support of the ITIN application, any copy of such documents must be certified as true copies by the government agencies that originally issued the documents. E.g., for a Philippine passport, a copy must be certified by the Philippine Department of Foreign Affairs (DFA). Notarized or other forms of certification are not accepted.

d) the entire ITIN application packet – the signed/dated Form W-7, its supporting documents, and the tax return – must be either mailed or sent via an approved private delivery service to the IRS’ ITIN Operation division in Austin, TX. No other address is accepted.

e) the federal income tax return that accompanies the ITIN application must be a “yet to be filed” tax return – either a return for the most recent tax year being reported (e.g., the current tax year being reported is 2017), or an amended tax return for a prior year. A copy of a previously filed tax return will not be accepted.

f) ITIN applications, their supporting documents, and their accompanying tax return cannot be filed electronically (e-filed). They must be sent to the IRS’ ITIN Operation division as paper forms, schedules, and statements.

Those are the “top offenders” when it comes to ITIN application rejection.

To each his own, Alan. If your adjusted gross income is low and you do not need the larger standard deduction the “Married Filing Jointly” (MFJ) would bring, then you’re most likely taking the right steps for your situation.

There are other advantages, however. For tax year 2018 (next year), a person using the “Married Filing Single” (MFS) filing status must file a tax return regardless of gross income levels, while couples using the MFJ filing status who have gross income that’s less than $24,000 are not required to file a tax return. That amount increases for each one of that couple whose age is 65 or greater. Too, for tax year 2017, the standard deduction for MFS filers is only $6,350 compared to MFJ filers $12,700. For tax year 2018, those figures jump to: MFS $12,000 and MFJ $24,000.

For an annual income of $28,000 that is wholly subject to federal income taxation, the difference between a MFS filer’s income taxes due and that of a MFJ filers could be as high as $1,455.

I am an IRS authorized Certified Acceptance Agent in the Philippines and can help you obtain an ITIN for your spouse. If you want, please contact me via email to my business address: [email protected] .